FRM’s Early View finds most hedge fund strategies ended March in positive territory

Beverly Chandler, Opalesque London: Man’s fund of fund division FRM reports in its Early View for March that the hedge fund industry posted another positive month for March, with the HFRX Global Hedge
Fund Industry finishing the month +0.72%, taking its Q1 performance to +3.13%. FRM writes: "Early data
suggests that the performance was generated across a broad range of styles with most
strategies ending the month in positive territory."

FRM believes that the core source of return for Equity Long/Short managers should be from sector or stock
picking, rather than simply from market exposure. "We have commented recently that we
believe a drop in inter-stock correlation has resulted in favourable conditions for these stock
pickers. One of the concerns was that the end of the Q1 earnings season could once again
result in Macroeconomic conditions (rather than fundamental stock-specific factors) driving
the pricing process. The emergence of the Cypriot difficulties during March should have
served to exacerbate these correlation concerns."

However, the firm finds that most analyses suggest that the end of earnings season has not resulted in any
noticeable increase in the correlations. "Indeed, BoA/ML research has suggested that interstock
correlations have fallen to a seven year low during March. However, we remain......................